4. Goodwill and Intangible Assets

Gross and net carrying amounts of goodwill at December 31, 2013 and 2012 are as follows:

In thousands	Performance Materials		Thermal/ Acoustical Metals		Other Products and Services		Totals
Goodwill	$	13,622	$	12,160	$	5,787	$	31,569
Accumulated amortization/impairment		—		(12,160)		(1,127)		(13,287)
Balance at December 31, 2012		13,622		—		4,660		18,282
Goodwill		13,929		12,160		5,787		31,876
Accumulated amortization/impairment		—		(12,160)		(1,127)		(13,287)
Balance at December 31, 2013	$	13,929	$	—	$	4,660	$	18,589

The changes in the carrying amounts of goodwill in 2012 and 2013 are as follows:

In thousands	Performance Materials		Other Products and Services		Totals
Balance at January 1, 2012	$	13,399	$	4,660	$	18,059
Goodwill adjustment		140		—		140
Currency translation adjustment		83		—		83
Balance at December 31, 2012		13,622		4,660		18,282
Goodwill adjustment		110		—		110
Currency translation adjustment		197		—		197
Balance at December 31, 2013	$	13,929	$	4,660	$	18,589

Goodwill Associated with Acquisitions and Divestitures

The goodwill adjustment of $ 0.1 million in 2013 and 2012 was related to the acquisition of DSM Solutech B.V. (“Solutech”) in December 2008. Lydall was obligated to pay to the Seller payments based on the net revenues of Solutech for a period of five years beginning on December 1, 2008 and ending on November 30, 2013 (“Contingent Consideration”). This Contingent Consideration equaled 4% of Solutech’s net revenues, as defined, during each of the periods. The value of the Contingent Consideration when paid was added to the original cost of the acquisition and increased the amount of goodwill previously recorded, as the acquisition occurred prior to the revised guidance issued by the Financial Accounting Standards Board (ASC 805) for business combinations.

Goodwill Impairment Testing

During the fourth quarter of 2013, the Company performed its annual impairment analysis of the $ 13.9 million of goodwill in the Performance Materials reporting unit (PM reporting unit) and $ 4.7 million of goodwill in the Life Sciences Vital Fluids reporting unit (VF reporting unit), included in OPS.

The Company elected to perform a quantitative approach to test the VF reporting unit and the PM reporting unit. For 2013, the Company used both the income approach and market approach in performing step one of the impairment analysis to estimate the fair value of the reporting units. The Company determined that the VF reporting unit, with $ 4.7 million of goodwill, had excess estimated fair value which exceeded its carrying value by greater than 20%, and as a result, step two of the impairment test was not required. The Company also determined that the PM reporting unit, with $ 13.9 million of goodwill, had an estimated fair value which substantially exceeded its carrying value, and as a result, step two of the impairment test was not required.

In performing step one of the impairment analysis to estimate the fair value of the reporting units for 2013, the Company used both: (i) the income approach - discounted cash flows, and (ii) the market approach - comparable company analysis. The income approach involved determining the present value of future cash flows from the reporting unit’s projected financial results in 2014-2016 and the projected cash flows beyond that three year period computed as the terminal value. The Company believes the income approach was appropriate because it provided a fair value estimate based upon the reporting unit’s expected long-term operations and cash flow performance.

In applying the market approach, valuation multiples were derived from historic and projected operating data of selected guideline companies, which were evaluated and adjusted, if necessary, based on the strengths and weaknesses of the reporting unit relative to the selected guideline companies. The valuation multiples were then applied to the appropriate projected operating data of the reporting unit to arrive at an indication of fair value. The Company believes the market approach was appropriate because it provided a fair value using multiples from companies with operations and economic characteristics similar to its reporting unit.

Other Intangible Assets

The table below presents the gross carrying amount and, as applicable, the accumulated amortization of the Company’s acquired intangible assets other than goodwill included in “Other intangible assets, net” in the Consolidated Balance Sheets as of December 31, 2013 and 2012:

	December 31, 2013				December 31, 2012
In thousands	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
License agreements	$	881	$	(881)	$	860	$	(854)
Patents		6,766		(3,307)		6,522		(2,781)
Other		278		(227)		272		(194)
Total amortized intangible assets	$	7,925	$	(4,415)	$	7,654	$	(3,829)

Amortization of intangible assets for the years ended December 31, 2013, 2012, and 2011 was $ 0.4 million, $ 0.8 million, and $ 0.9 million, respectively. Estimated amortization expense for intangible assets is expected to be $ 0.4 million for each of the years ending December 31, 2014 through 2017, and $ 0.3 million for the year ended December 31, 2018. As of December 31, 2013, the weighted average useful life of intangible assets was approximately 10 years.

During the third quarter of 2013, the Company performed an impairment analysis for long-lived assets at the Company’s DSM Solutech B.V. (“Solutech”) operation, included in the Performance Materials segment. Developments with customers caused the Company to determine that it was probable that Solutech net sales would not meet previous expectations for 2013. Due to the lower than expected sales, caused by a delay in commercialization of Solutech products to the market place by Solutech’s customers, negative cash flows were expected in 2013. As a result of these negative cash flows, combined with historical operating losses, the Company determined that it was appropriate to test the Solutech asset group for recoverability in the third quarter of 2013. Acquisition related intangibles with a remaining useful life of 10 years primarily comprise the carrying value of the asset group of $ 4.7 million. To determine the recoverability of the Solutech asset group the Company completed an undiscounted cash flow analysis and compared it to the asset group carrying value. This analysis was primarily dependent on the increase in net sales over the period when the business has technological exclusivity provided by the intangible assets.

The Company determined that the Solutech asset group had undiscounted cash flow which was in excess of its carrying value and, as a result, the asset group was not impaired at September 30, 2013. The estimate of undiscounted cash flows of the Solutech long-lived asset group was based on the best information available as of the date of the assessment, which incorporated management assumptions around cash flows generated from future operations, the estimated economic useful life of the primary asset within the Solutech long-lived asset group, as well as other market information. The Company performed various sensitivity analyses noting that a more conservative scenario of high single digit revenue growth and an appropriate related cost structure, the undiscounted cash flows exceeded the carrying value with no impairment indicated. As of December 31, 2013, the Company expects to meet the cash flow forecasts included in the impairment analysis. Future cash flows are dependent on the success of commercialization efforts of Solutech products by OEMs, the quality of Solutech products and technology advancements and management’s ability to manage costs. In the event that Solutech’s cash flows in the future do not meet current expectations, management, based upon conditions at the time, would consider taking actions as necessary to maximize cash flow. Accordingly, the above sensitivity analysis, while a useful tool, should not be used as a sole predictor of future impairment. A thorough analysis of all the facts and circumstances existing at the time would need to be performed to determine if recording an impairment loss was appropriate.